Financial History Issue 124 (Winter 2018) | Page 28

A New York Stock Exchange trader reacts to the Crash of 1987.
Front page of The Philadelphia Inquirer the day of after the crash, October 20, 1987.
26    FINANCIAL HISTORY  |  Winter 2018  | www.MoAF.org
noses were to the South African grind-
stone,” he later recalled. But Machold had
grown increasingly wary of the market
and had put the cash from these sales into
safer investments.
Sometime after 2 pm on Monday, Octo-
ber 19, one of his colleagues came into
his Trenton office and told him what was
happening at the NYSE. He hurried to
the room that served as the fund’s trading
desk. In one corner was a small Knight
Ridder newswire printer, perched on a
flimsy tripod, spewing out four-inch-wide
strips of newsprint with barely an eye
blink between updates. The market was
down almost 300 points.
Machold looked at the individual stock
prices spooling out of the machine. He
instantly asked, “How much cash do we
have?” His team found about $200 million
that could be quickly deployed, and they
started trying to get through to brokers
to buy some of the dirt-cheap blue chips
going begging. Working against the clock,
they put the whole $200 million to work,
plucking up bargains as fast as they could.
They were the bargain hunters the
Berkeley professors who had designed
portfolio insurance had been counting
on to take the other side of the trades
required by their hedging strategy. But
with no way of knowing that the avalanche
of sell orders was coming, Machold’s
team had limited time and limited cash,
compared to the giant institutions lining
up to sell at any price. “Nothing would
slow that market,” Machold said. As the
clock’s hand moved toward 4 pm, the
market dropped like a bouncing boulder,
smashing through the 300-point loss line,
plunging past the 400-point loss line. A
strange hilarity seized Machold and his
staff. They began to perversely applaud
each new negative milestone, even though
it meant their own stock portfolio’s value
was shrinking.
When the index was down 492 points,
it bounced back up a bit — and the little
squad in the trading room groaned. Then,
in a final rush, the Dow broke the 500 level
and finished down a staggering 508 points.
“We all cheered,” Machold said. “What
else could we do?”
When Phelan saw his Washington
visitor out the door and returned to his
desk in the early afternoon, the Dow was
already down a historic 200 points. Then,
as he watched, the market simply “melted
away.” At the close, the Dow stood at